Transit Electrification in Colombia: An Unaffordable Dream?

Source: El Tiempo, December 19th, 2018.

The results of Bogotá’s 2018 ender to renew its BRT fleet illustrate how Colombian cities are struggling to electricity their public transportation systems. Nevertheless, such electrification is essential, and there are a number of concrete financial and regulatory steps government can take to facilitate the transition.

In February 2018, Bogotá redrafted the tender to renew its sixteen-year-old Bus Rapid Transit (BRT), making modifications that emphasize clean energy. The review followed widespread citizen mobilization in favor of environmental sustainability; a significant portion of the public was very concerned by the marginal weight granted to clean technologies within the BRT’s mandate. In a survey conducted in 2017, 52% of the respondents reported that they believed air pollution was the country’s main environmental challenge[1].

In late 2018, while Ecuador’s Guayaquil and Chile’s Santiago started to electrify their BRT systems, Bogotá’s tender was awarded to a group that did not include electric buses in their bid[2]. The group’s proposal states that roughly 60% of the new buses will run on diesel and 40% on natural gas. Colombian local transport authorities argue that current upfront costs of e-buses are prohibitive[3] for public finances, especially when compared with the cost of diesel-powered buses.

Most cities in Colombia have invested in BRT systems during the past decade in an effort to provide upgraded, formal, and integrated public transit, and most of these cities have plans to further expand BRT networks.

Air pollution is especially acute in the metropolitan areas where these BRT systems operate. The electrification of BRT systems alone will not solve air quality issues. BRT accounts for only about half of commutes in the city of Bogotá[4]). However, the visibility of BRT buses makes it likely that their electrification will encourage traditional bus operators to embrace the clean energy transition. Therefore, they represent a powerful starting point for a national-level clean energy transition. In this article, I explore potential solutions to the current obstacles to such a transition. Why are Colombian cities lagging behind in electrification compared to their peers in Latin America?

Context is necessary in order to highlight the importance of transportation in climate change mitigation. In 2018, the Intergovernmental Panel on Climate Change (IPCC) reported that without action, greenhouse gas emissions from the transportation sector are likely to double by 2050[5]. Electrifying the passenger transport industry is recognized as an effective way of both mitigating GHG emissions from the transport sector and improving local air quality.

Electric public buses represent a double opportunity. Besides directly cutting air pollutants and GHG emissions, they indirectly diminish emissions through their contribution to more energy-efficient urban patterns, such as transit-oriented developments [6]. Cities embracing transit-oriented developments densify areas adjacent to transit lines, reducing car-dependency by making transit more accessible to a higher proportion of residents.

Source: Transminlenio's Twitter account, February 21st, 2017.

Air quality in Colombian cities has consistently worsened in recent years, and in them, transport accounts for 70% of particulate matter (PM). In 2017, the PM 10 concentration in 76% of monitored Colombian municipalities was above the national target, and air pollution accounted for 8,000 early deaths in Colombia in 2015[7]. Clearly, there is a need for cleaner transit.

By international standards, Colombia’s energy mix is relatively low-carbon. Hydropower accounts for two thirds of the electricity generated, with the remaining third generated by fossil fuels[8]. Electrifying the transport sector is therefore an optimal solution for reducing the country’s carbon footprint, and one that can be more easily done in Colombia than other countries more dependent on fossil fuels.

Since the debate on electrification entered the public agenda a decade ago, concerns about technical problems with e-buses have been constant. Nevertheless, recent improvements dismiss traditional arguments related to unreliability, insufficient range, and low efficiency[9]. Bogotá conducted a pilot project with BYD, a Chinese e-bus manufacturer, to test e-bus’ performance. The results were highly encouraging, with buses exhibiting a drive range of 250 km - greater than the daily distance driven by the current diesel buses within the fleet. Moreover, the cost of energy per kilometer driven was 43% lower than that of diesel buses, and maintenance cost per kilometer dropped 83%. The operation of each e-bus resulted in C02 emissions reductions of 112 tons per year[10].

The operation of each e-bus resulted in C02 emissions reductions of 112 tons per year

Some efforts to boost electrification are already in place, but they are insufficient.In 2017, the previous central administration drafted a policy encouraging the purchase of e-vehicles (all vehicles combined, not only buses). The bill sets a 0% tariff rate - compared to the usual 35% - on imports of up to 7,000 electric or hybrid vehicles, distributed over a 10 year-period[11]. This policy is a good starting point, but its scope is limited and there is a need to both deepen incentives and tailor them to the passenger transport industry.

Source: La Silla Vacía, February 6th, 2014.

Potential funding mechanisms

Perhaps the most simple way to finance BRT electrification would be to raise the passenger fee. However, this presents risks. Ridership is already declining due to widespread dissatisfaction with the quality of service. And demand is elastic, meaning a higher fare could trigger a vicious circle of decreasing ridership, slower network expansion, an increased deficit, and more investment in individual modes transportation.

Continuing to lower tariffs on imported e-vehicles seems more practical. Other governments have managed to boost e-bus purchases by providing tax exemptions. For instance, in 2015, the Chinese central government launched tax exemptions for e-bus purchases[12], leading to an exponential increase in sales. Colombia’s current tax exemption program is too narrow in scope. To make real progress, all e-bus imports should be tariff-free until full electrification is achieved.

In 2015, the Chinese central government launched tax exemptions for e-bus purchases, leading to an exponential increase in sales.

The use of oil royalties to subsidize the electrification presents another promising option. There are £3.6 billion available in the General Royalties System (SGR) for 2019 and 2020, up 25% from the previous two-year period. These resources finance projects formulated by regional and local governments. Reserving a portion of the SGR fund for sustainable transport technologies can incentivize local governments to launch electrification schemes. Such resources could go to the acquisition of the buses and charging infrastructure, alike.

To relieve the challenges of high up-front investment, it will be critical to create a bus leasing scheme in partnership with financial institutions. In the United States, e-bus manufacturers have entered into partnerships with investment firms that acquire the vehicles and/or the batteries and then lease them to BRT operators[13]. The Colombian government could similarly incentivize traditional lenders to offer leasing opportunities by providing security deposits for leases. This option also transfers the burden of end-of-life management to the financial institution. The city of Guayaquil opted for a more traditional funding mechanism: one of the transit operators obtained a loan from CFN - a national development bank - with a preferential interest rate of 7.5%. In Colombia, operators could sign agreements either for leasing or purchase with national or multilateral development banks such as Bancoldex, the Interamerican Development Bank, or others.

Government might also consider signing agreements with utility firms for the installation of charging infrastructure. Local governments are concerned about the cost and eventual technical difficulties of installing charging stations. The natural gas industry has offered to bear the cost of this infrastructure, should the buses run on gas. Securing this type of agreement with power companies across the country will be important for making the transition affordable.

Finally, providing operators exemption from regulatory costs can speed the transition process. The Colombian Ministry of the Environment currently requires both BRT and traditional bus operators to install exhaust particle filters in their diesel-powered vehicles to mitigate PM emissions. The Ministry could exempt operators from this requirement if they opt to acquire e-buses. This policy could launch an immediate energy transition, without the need to wait for the next round of tendering processes, which take place on average every 12 years. However, this change would require more complex enforcement instruments in order to avoid potential freeriding by some operators.

Enable Cities to Lead

All of these possibilities should be made available for interested local governments, who can choose the option or combination of options that best suits their existing needs and resources. Implementing a mix of tax exemptions, dedicated grants, and leasing schemes seems may be the right approach for local governments looking to lower their opportunity cost of BRT electrification.

The policy options discussed here should be on the table at President Duque’s next meeting with the association that gathers mayors of Colombia’s largest cities (Asocapitales). Without support from the national government, municipalities will may fail to avoid decades of carbon lock-in.

Andrés Melendro Blanco, Latin America and China Coordinator for the Oxford Urbanists,is currently studying Mandarin and environmental policy at Tsinghua University in Beijing. His main interest is the spatial analysis of public policies. He is currently conducting research on China’s climate change adaptation strategies in light of its accelerated urbanization process. He is looking forward to contrasting them with Latin American experiences through his work with the Oxford Urbanists. He previously worked as an editor for The Business Year, an international media group, as a consultant for UN-Habitat, and as an urban development analyst at ProBogotá, a think-tank dedicated to fostering Bogotá’s sustainability. He holds a bachelor’s degree cum laude in Political Science and a master’s degree in Urban Policy, both from Sciences Po Paris.

[6] Marks, Michael, et al. People Near Transit: Improving Accessibility and Rapid Transit Coverage in Large Cities, ITDP, October 2016. Available at https://www.itdp.org/publication/people-near-transit/

[8] International Energy Agency, Colombia Statistics. Available at https://www.iea.org/statistics/?country=COLOMBIA&year=2016&category=Key%20indicators&indicator=ElecGenByFuel&mode=chart&categoryBrowse=false&dataTable=ELECTRICITYANDHEAT&showDataTable=false